Handbook of Information Security Management
(Publisher: CRC Press LLC)
Author(s): Hal Tipton and Micki Krause, Consulting Editors
ISBN: 0849399475
Publication Date: 01/01/98

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Definitions of Industrial and Economic Espionage

Industrial espionage is defined as an individual or private business entity sponsorship or coordination of intelligence activity conducted for the purpose of enhancing a competitor’s advantage in the marketplace. According to the FBI, economic espionage is defined as: “Government-directed, sponsored, or coordinated intelligence activity, which may or may not constitute violations of law, conducted for the purpose of enhancing that country’s or another country’s economic competitiveness.”

Economics, World Trade, and Technologies

What has allowed this proliferation of technologies to occur? Much of it was due to international business relationships among nations and companies. Some of it was due to industrial and economic espionage.

The information age has brought with it more international businesses, more international competitors, and more international businesses working joint projects against international competitors. This has resulted in more opportunities to steal from partners. Moreover, one may be a business partner on one contract while competing on another; thus, providing the opportunity to steal vital economic information. Furthermore, the world power of a country, today, is largely determined by its economic power. Thus, in reality, worldwide business competition is viewed by many as the economic war. This world competition, coupled with international networks and telecommunications links, has provided more opportunities for more people such as hackers, phreakers, and crackers to steal information through these networks. The end of the Cold War has also made many out-of-work spies available to continue to practice their craft, but in a capitalistic environment.

Proprietary Economic Information

This new world environment makes a corporation’s proprietary information more valuable than previously. Proprietary economic information according to the FBI is “...all forms and types of financial, scientific, technical, economic, or engineering information including but not limited to data, plans, tools, mechanisms, compounds, formulas, designs, prototypes, processes, procedures, programs, codes, or commercial strategies, whether tangible, or intangible... and whether stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing...”. This statement assumes that the owner takes reasonable measures to protect it, and that it is not available to the general public.

A security association’s survey taken among 32 corporations disclosed that proprietary information had been stolen from their corporations. These thefts included research, proposals, plans, manufacturing information, pricing, and product information. The costs to these corporations were substantially in terms of legal costs, product loss, administrative costs, lost market share, security cost increases, research and development costs, and loss of corporate image in the eyes of the public.

Economic Espionage Vulnerabilities

The increase in economic espionage is also largely due to corporate vulnerabilities to such threats. Corporations do not adequately identify and protect their information, nor do they adequately protect their computer and telecommunications systems. They do not have adequate security policies and procedures; employees are not aware of their responsibilities to protect their corporation’s proprietary information. Many of the employees and also the management of these corporations do not believe that they have any information worth stealing or believe that it could happen to them.

Economic Espionage Risks

When corporations fail to adequately protect their information they are taking risks that will in all probability cause them to lose market share, profits, business, and also help in weakening the economic power of their country.

These are some actual cases of economic espionage:

  • A foreign government intelligence service compiled secret dossiers of proprietary proposals of two companies from two other countries. Then, they gave that information to one of their country’s companies, also bidding on the same contract. Their country’s company won a billion dollar contract.
  • A company contracted with a foreign government for a product. After disagreements, the government gave the proprietary information to one of their own companies.
  • Foreign businessmen were arrested in a government agent sting operation for stealing proprietary information from their competitor.
  • An employee of a U.S. microprocessor corporation admitted selling technology information from two companies where he had been employed. The information was alleged to have been sold to China, Iran, and Cuba.
  • A foreign company, which could be a foreign government-fronted company, buys into a contract at a bid below its costs. They used the opportunity to steal technology information to be used by their country.

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